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Effect of Transactions on Accounting Equation

Jay Pembroke started a business. During the first month (April 20--), the following transactions occurred.

1. Invested cash in business, $18,000.
2. Bought office supplies for $4,600: $2,000 in cash and $2,600 on account.
3. Paid one-year insurance premium, $1,200.
4. Earned revenues totaling $3,300: $1,300 in cash and $2,000 on account.
5. Paid cash on account to the company that supplied the office supplies in transaction (b), $2,300.
6. Paid office rent for the month, $750.
7. Withdrew cash for personal use, $100.

Required:

Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owner's Equity (Capital - Drawing + Revenues - Expenses). After transaction (g), report the totals for each element. Use the minus sign to indicate a decrease or reduction in the account. If an amount box does not require an entry, leave it blank.

Assets

=

Liabilities

+

Owner's Equity

(Items Owned)

(Amts. Owed)

(Owner's Investment)

(Earnings)

Cash

+

Accounts Receivable

+

Office Supplies

+

Prepaid Insurance

=

Accounts Payable

+

J. Pembroke, Capital

-

J. Pembroke, Drawing

+

Revenues

-

Expenses

Description

a.

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b.

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c.

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d.

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Rent expenseService feesTelephone expenseWages expense

e.

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f.

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Rent expenseService feesTelephone expenseWages expense

g.

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Bal.

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+

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=

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-

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+

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-

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Demonstrate that the accounting equation has remained in balance.

Cash	$fill in the blank 75
Accounts receivable	fill in the blank 76
Office supplies	fill in the blank 77
Prepaid insurance	fill in the blank 78
Total Assets	$fill in the blank 79

Accounts payable	$fill in the blank 80
Jay Pembroke, capital	fill in the blank 81
Jay Pembroke, drawing	fill in the blank 82
Service fees	fill in the blank 83
Rent expense	fill in the blank 84
Total Liabilities and Owner's Equity	$fill in the blank 85

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